Men and women now need over £150,000 to fund a basic retirement income

Published by Hugh Morris on 25 April 2013. Last updated on 25 April 2013

Men and women aged 65 will now have to save £152,800 for their retirement to secure an annual income of £5,000, according to figures released by the Office for National Statistics (ONS).

The figures represents a 27% increase over the last three years for men; while women (who used to pay more for annuities due to their longer life expectancy) will now pay 14% more than they did in 2009 to fund a retirement income of £5,000 a year.

Today's figures, published as part of the ONS's Pension Trends series, shows overall pension saving is rising: the average pension savings of all UK households headed by a 16 to 64-year-old rose from £54,000 in 2006-08 to £79,200 in 2008-10.

But retirement incomes have increased in price due to dwindling annuity rates.

Disparity

Patrick Connolly, a financial planner at AWD Chase de Vere, explains: "While it is positive the amount of overall pensions savings is increasing, this headline figure hides the huge disparity between different groups of people and also the cost of generating income in retirement has also significantly increased over the year.

"It is typically the older generations who have better pension provision: They have often benefited from generous support from their employers, including much wider access to final salary pension schemes. Many have also benefited from the major increase in house prices over the past 20 years.

"This gives the older generation large amounts of equity in their properties and also means that most have comparatively small if any outstanding mortgages, increasing their disposable income."

He warned that the younger generations struggling to put aside money for their retirement as they save for a house deposit pose a huge problem to the country.